WHEN Egypt’s President Mubarak visited Japan and the US this spring, his entourage included one the of the stars of the Egyptian business community, Mohamed Farid Khamis. Better known for his highly successful Oriental Weavers Group, which exports carpets around the world, Khamis is now starting to make his mark in heavy industry.
But nothing he has done has been as ambitious as the scheme Mubarak has now entrusted him with: the construction of a $1,500 million petrochemicals complex on the Gulf of Suez. The project was at the heart of the business discussions held in Tokyo and the US, and several companies including Dow Chemical, Mitsui & Company, Mitsubishi Corporation and Marubeni Corporation, have expressed serious interest in becoming involved.
The idea, which was spawned at the Casablanca economic summit in October 1994, is to exploit Egypt’s natural resources of oil and gas and its geographical position to set up a world-class, export-oriented petrochemicals giant.
However, there is little evidence of any exhaustive studies having been carried out, and the project is much larger than any other attempted by the private sector. Khamis himself has directed his involvement in the scheme through the Federation of Egyptian Industries, of which he is chairman, rather than through Oriental Weavers. His own private business interests are focused on a smaller petrochemicals project in Alexandria to make polypropylene to be used as a feedstock for the manmade fibres needed by his textiles and carpet factories.
The Egyptian General Petroleum Corporation (EGPC) has agreed, in principle, to take a 20 per cent stake in the £E 1,000 million ($295 million) capital of the new venture. But, the EGPC is devoting more immediate attention to carrying out a project to build an ethylene/polyethylene unit at the Alexandria plant of its affiliate, Egyptian Petrochemicals Company (EPC).
Details of the Suez project remain sketchy. But industry sources say that it will be based on an ethylene plant with the capacity of 750,000 tonnes a year (t/y). Feedstock will be a combination of associated gas from the Gulf of Suez and naphtha. Some of the ethylene will be exported, and the remainder used in downstream units, including polyethylene, polypropylene, polyvinyl chloride (PVC) and polystyrene.
The project has been given Investment Authority approval, and it has been announced that 30 per cent of the capital will be offered in a public subscription. Three banks have agreed to take a 20 per cent stake, along with EGPC and private business groups. The approach appears to be to establish a holding company, with international investors taking stakes in downstream subsidiaries.
However, the project does have its critics. The main charge levelled against it is that it has grown out of a political decision, rather than from government plans or private initiative. ‘It is very easy to secure approval for a high profile project in Egypt,’ says one sceptical Cairo businessman. ‘It is quite another thing to turn the project into a reality.’ He cites as examples the numerous private oil refinery projects that have been announced during the past 10 years, only one of which looks realistically like being carried out.
More securely rooted in reality is the EPC ethylene/polyethylene project. This is an outgrowth of EPC’s initial investments in the early 1980’s in PVC and vinyl chloride monomer units. The plan is to build a 150,000- t/y ethylene unit; 50,000 t/y will go to the PVC plant, and the remainder used to make polyethylene. The US’ ABB Lummus Crest has the contract to provide technology and engineering for the ethylene unit; the corresponding contract for the polyethylene unit is expected to be awarded to either BP Chemicals and Union Carbide Corporation. The plant, which will cost about $450 million, is due to start up by the end of 1996. It is being financed by EGPC and local banks.
Khamis, meanwhile, is negotiating with international licensors about the 120,000-t/y polypropylene plant he plans to build in Alexandria. It will be owned by a new affiliate of Oriental Weavers, named Oriental Petrochemicals.
The Gulf of Suez scheme may yet overshadow both EPC and Oriental Petrochemicals. But so far at least, the smaller schemes carry greater credibility.